"this is no longer a buy-the-dip market"

CTA Caesar says this is no longer a "buy the dip" market

1. "SPX is currently through GS short term CTA threshold trigger for the first time since May 24th and below the S&P500 50-day moving average. There has been a clear shift in sentiment over the past few weeks..."

2."Investors have shifted their trading behavior from a BTD “Buy the dip” market to STR “Sell the Rally” market. This is a new change in tone and sentiment. This is something that I have not said often..." (Scott Rubner)

Right on cue with seasonal weakness

Bull Boss Ryan Detrick says that we are right on que the seasonal weakness. "Remember, years that were up >10% at the midpoint tended to consolidate around here. This isn't the end of the world, but likely a pause before an end of year run."

Source: Ryan Detrick

September comes early

Scott Rubner agrees that September negative seasons may get pulled forward before vacations. The median return for S&P since 1928 is-1.56%, September is the worst month of the year.

Source: Scott Rubner

What are hedge funds doing?

"Overall Prime book saw increased grossing trading activity in 9 of the last 10 sessions, suggesting renewed risk appetite. US equities collectively saw increased shorting activity in 8 of the last 10 sessions. MTD short flow already exceeds the activity July by ~2.5 to 1 in notional terms" (GS trading desk)

"Most shorted" basket in August

Price momentum of high short interest stocks in the US has seen a sharp reversal so far in August, with the GS Most Short basket down -12.6% vs. SPX -2.2% MTD coming into todays session. CITIs most shorted basket is -15% in August.

Source: GS / CITI

"Fed pivot" where are you?

Odds of an additional rate hike this year rise to 39%, a 4-week high, after Fed minutes. In the minutes, officials felt the "potential need for higher rates" still exists. There's now a 3.6% chance of two more 25 bps rate hikes. (TKL)

Highest since happy days of 2008

The 10-year at 4.27% is at its highest closing level since June 16, 2008.

Source: Refinitiv

Getting real

10y US real rate is testing new high in this cycle.

Source: BofA

Shitquidity

Top book liquidity in ES1 (e-mini futures) has declined by ~56% over the past two weeks. Top book liquidity, or the ability to transfer risk quickly has declined from $25M on the screens to $11M today, this has been cut in half since July.

Source: Goldman

Implied correlation is down to 2017 levels

Implied equity correlation- has fallen back to 2017 lows pointing to a stock picker's environment.

Source: Deutsche

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